media markets, special interests, and voters

Media Markets, Special Interests, and Voters

Leopoldo Fergusson

U Andes

October 27, 2011

Fergusson (U Andes) Media & Special Interests October 27, 2011 1 / 24

Introduction

Major concern in democraciesInfluence of special interest groups

Some US Examples

The “Keating Five” Scandal (1989): Five Senators accused ofintervening to delay regulation in 1987, acting on behalf of Charles H.Keating, head of Lincoln Savings and Loan Association, who hadcontributed to the Senators’ political campaigns.The recent financial meltdown: Political power of Wall Street inWashington as a fundamental cause: “Campaign contributions andthe revolving door between the private sector and government servicegave Wall Street banks influence in Washington” (Johnson and Kwak,2010).Recent “mid-term elections:” Spencer Bachus (R.-Ala), receivedover a million dollars from ”banks, insurance companies and auditors(...) “And wasting no time (as chairman of the House FinancialServices Committee) Bachus sent a letter to the Financial StabilityOversight Council that reads as if dictated by bank lobbyists”Fergusson (U Andes) Media & Special Interests October 27, 2011 2 / 24

Introduction

How can the influence of interest groups be tamed?The role of media

In a democracy, the most basic safeguard are elections.

If influence on a particular candidate is (or appears) improper! vote topunish.But for this, voters need information, and mass media is the mainsource.

For this reason (among others) the presence of a free, independentmass media is a key component of democratic political institutions.

Many believe mass media indeed played this role historically

Example: Early XXth Century US, from the ”Gilded Age” to the”Progressive Era”. Free press and journalists (”muckrakers”) exposedthe excesses of Robber Barons as well as corruption in local and federalpolitics.


Introduction

The questionsMass media countering special interests

1 Can mass media counter the influence of special interest groups?

2 In particular, can it help voters respond to potentially impropercapture of candidates by special interests as signaled by campaigncontribution patterns? If so, how important is this e↵ect?


Introduction

The approachCompare voters’ response to campaign money across di↵erent media markets

County-level support for US Senate candidates, 1980 to 2002.

Variation in media exposure: TV markets’ structure [map].

Media market In-state Out-of-stateCoverage of state politics: High Low

Variation in ”capture” of politicians by special interests: campaigncontributions data.

Campaign finance pattern: Concentrated DispersedPolitician ”capture”: Likely Unlikely


Introduction

Pattern of campaign contributions is a good proxy forcapture by interest groupsSome anecdotal evidence

Individuals often do not know the pattern of campaign contributions.

But even if this is the case, a candidate with a more concentratedpattern of contributions is more likely to be pinpointed by journalistsor his opponent as potentially “captured.”

Such candidate is likely to figure in ads and news as being tightlylinked to the economic sectors heavily contributing to his campaign.

Two (non-random) examples: Donald Riegle and John F. Kerry


Introduction

Donald W. Riegle, Jr (D-MI)

One of ”The Keating Five” (Others were Alan Cranston, DennisDeConcini, John Glenn, John McCain).

Riegle’s herfindahl in 1982: 0.592 at the PAC level (sample mean is0.02); 1 at industry level. Why? He had received money from just ahandful of Saving and Loans PACs!

In 1988: More than 20 S&L PACs, ˜200 PACs from the Financialsector contributed ˜$500K to his campaign (larger than any othersector).


Introduction

Riegle did not run for reelection after the 1989 Savings and Loansscandal: ”I certainly regret and accept responsibility [for actions that]did lend themselves to an appearance of a conflict of interest.“ (1991)


Introduction

John F. Kerry (D-MA)1996 high herfindahl and campaign finance scandal


Introduction


Introduction

Gary Hart (D-CO)

The Federal Election Commission has accused a California developerof making contributions exceeding the legal limit of former SenatorGary Hart. The commission contends that Mr. Stein, donated atleast $38,750 for the 1980 campaign


Introduction

More systematic evidenceA good proxy


Basic Approach

Simplest specification

Compare in-state versus out-of-state voters response to campaignfinance profile.

Comparison: in-state versus out-of-state counties (c) within eachstate (s) :

V Ict = �in⇥hI

⇣inc ⇥ hIst

⌘+ �in⇥hO

⇣inc ⇥ hOst

⌘(1)

�s⇥PI + ✓t⇥PI + �0XXcst + "sct

where:

I=incumbent, O =opponent;V Ict=incumbent share of the two-party vote,

inc=1 if c is in-state, 0 if out-of-state;hIst =herfindahl concentration index of special-interest campaigncontributions for the incumbent (hOst , for the opponent);Xcst=vector of additional controls (& non-interacted terms).


Leopoldo Fergusson

Leopoldo Fergusson

Leopoldo Fergusson

Overview of Results

Overview of main results and robustnessVoters in in-state media markets punish ”captured” politicians

An increase in the concentration of campaign contributionsleads to a di↵erential response from voters across di↵erentmedia markets.

Main concern: counties in out-of-state dominated media markets aredi↵erent.

However:

E↵ect IS present:

1Relying solely on variation in concentration across time within the same

county (county fixed e↵ects).

2Focusing on more comparable in-state counties that are geographically

contiguous to out-of-state.

Moreover, e↵ect IS NOT present:

Moving from in-state towards out-of-state counties without change in

media exposure.


Overview of Results

Nieghboring counties are more comparable


Overview of Results

Other results

Share of connected-PAC money does not a↵ect vote sharedi↵erentially across counties, unlike concentration.

Suggests ”capture” is punished, not just ”money”.

Turnout a↵ected when moving from in-state to out-of-state (and notfrom placebo in-state to out-of-state).

Reassuring evidence that it is information.

Not significant spillovers to fellow party members, in the same oracross states.

Main results not driven by di↵erential partisan trends across counties.

Media market definition: main results are robust to choice ofthreshold, or to using a continuos measure of ”in-state” (share ofin-state population of the media market).


Final Remarks

Summing up

Voters assess interest group money negatively, but in a relativelysophisticated way:

Total interest group money is not punished.Concentration of interest group money from a few sectors is.

Consistent with the idea that voters punish “capture” of politicians byinterest groups, when media provides the relevant information.

Robustness checks suggest results are driven by information, not otheromitted variables (like geographical trends), nor by di↵erentialpartisan trends across counties.


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